Finance is a system of creating money. It provides x-ray vision into our business to help us identify where we are making money and where we are losing it.
Unfortunately, finance is often viewed in a negative light by business people. It is seen as a necessary evil, something to be endured, or something that is done to us. We shape our view from the unpleasant experiences we have with finance – tax forms to file, bills to pay, and financial statement audits from outside CPAs. Taken together, instead of a system to create money, finance feels like a hammer that hits us over the head repeatedly.
Finance is the hammer, and we are the nail.
But I bring good news – it doesn’t need to be this way. With a bit of education, training, and pro-active planning, you Mr. Beer Distributor can swing the hammer of finance and use it to your advantage. Rather than being pummeled by taxes, bank audits and surprise accounting adjustments, you get to swing the hammer and use finance for it’s true purpose – to create money.
So, let’s start with a few tips to help you swing the finance hammer.
Talk taxes. One step you should take right now is to meet with your tax planner and actually plan your taxes. It’s simple, but few distributors actually do this. No one wants to talk about taxes: It’s boring, complicated and a painful. We have an expectation that our tax people have done everything they can to minimize taxes for us, but often they haven’t. Not because they aren’t trying, but they just don’t ask enough questions, and we don’t provide enough information or answers. Meet with your tax folks. Have a conversation, talk about the business, ask what they are doing to minimize your taxes. Ask what you can do to lower the tax bill. In short, you swing the tax hammer, and see what tax savings you can bash out. The results will surprise you.
Squeeze the value from your CPA. If done well, a financial statement audit from your outside CPAs can be a fantastic investment in your business. I’ll bet you’ve never heard that line before, but it’s true. An audit is the best way to learn what was going on inside a business. The process analyzes historical trends in sales, margins and expenses. It scrutinizes assets acquired or sold, new loans that came on the books and loans that were paid off.
The financial statements show everything, and an audit helps interpret the results.
The problem is that in most financial statement audits there’s no time to take the knowledge gained to improve the business and add value. The audit is a process unto itself – a necessary evil, something the bank requires, a report that gets filed in a drawer. Time for this to change. To swing the finance hammer you need to take back control of the financial audit, and squeeze the value from your CPAs.
Start by looking at the CPAs as trusted business advisors – they have to be there to satisfy your loan agreement with the bank, but it doesn’t have to be painful. You are paying them and they work for you. Next, take a pro-active role in planning the audit. Find out what information the auditors will need and have your team get it ready. The goal is to get the CPAs finished with the compliance work quickly (the work for the bank) so they can turn their attention to adding value to your business.
Next, have a business conversation with the CPAs – ask questions and provide information about your company which adds meaningful details to the numbers that have been reviewed. What do they see in the numbers? What is was working well? What problems did they foresee? The combination of your business perspective with the auditors knowledge and financial super powers can be a powerful duo. Take advantage of the opportunity for a financial statement audit. You’ll be glad you did.
Finance is a system of creating money. The finance hammer is the tool you should use to your advantage. Now get out there and hammer out the profits.